The terrible price of inaction
Region’s refusal to add pipeline capacity is costing us a lot
THIS WEEK NEW ENGLAND reached the terrible distinction of having the most expensive natural gas in the world.
You read that correctly: Not just the highest natural gas prices in the United States, or in North America, but on the entire planet.
When the spot-market price for natural gas hit $35.35 Tuesday at the main trading hub for all of New England, the Algonquin Citygate, that was more than 13 times more expensive than at the central US price-setting location, the Henry Hub in Louisiana. That’s the equivalent of filling up your car with $32-a-gallon gasoline.
Why is this happening? The short answer: New England does not have sufficient natural gas pipeline capacity needed to ensure reliable, affordable access to this clean-burning, abundant fuel produced right here in the United States.
Our region has aggressively transitioned much of its power generation in the last decade to natural gas to take advantage of the abundant supplies here in the United States as well as the environmental benefits that come with the use of this clean fuel. Today, data from ISO-New England, our regional power-grid operator, show that natural gas now produces 50 to 60 percent of the electricity we use in New England on an average day.
New England has also moved just as aggressively to increase use of natural gas to heat our homes, schools, and businesses. Since 2000, more than 200,000 residential customers have switched to or added natural gas heating throughout the region. Natural gas now heats more than 52 percent of all homes in Massachusetts and 54 percent in Rhode Island, according to the Northeast Gas Association.
Connecticut, Maine, New Hampshire, and Vermont have multiple proposals underway to meet thousands of consumers’ demand for expanded access to convenient, affordable natural gas. Customers are clearly demanding greater access to natural gas.
But except for a modest increase in capacity on the Algonquin system and for some recent upgrades, increased natural gas pipeline capacity has been thwarted from coming anywhere close to keeping up with increased demand in the region.
In a cold snap like the one we’re facing, the severe constraints on pipeline capacity lead to sudden price spikes, and natural gas that normally costs $3 or $4 jumps to $35. Additional pipeline capacity could help dramatically reduce those price spikes.
Further, utilities are less able to plan 12 months ahead if energy markets are volatile. It’s why all six New England states rank in the top 10 of US states for most expensive electricity, up to 50 percent higher than the national average.
What’s even worse: This is an entirely needless problem for our region. New England is just 200 miles east of some of the most abundant, low-cost natural gas in the world from Pennsylvania’s Marcellus Shale region. With adequate pipeline capacity, access to this low-cost fuel could transform our regional economy and lead to the creation of thousands of new jobs. The opportunity is right in front of us–and New England is being denied that opportunity.
Stephen C. Dodge is the executive director of the New England Petroleum Council.